Estimated read time: 3-4 minutes
This archived news story is available only for your personal, non-commercial use. Information in the story may be outdated or superseded by additional information. Reading or replaying the story in its archived form does not constitute a republication of the story.
A home auction that garnered nearly $7.5 million in bids last week was a failure. The banks who own the foreclosed properties rejected most of the bids.
Tom Johansen thought he had a great deal on an auctioned-off lot in Ogden. "We may sell it. We may build," he said. "Assuming the bank accepts, it's a very good deal."
But that was two weeks ago. Today, he found out the bank declined his bid.
"I don't understand. There's a thousand people who show up at that auction and bid. Is this some sort of game they're playing with us? I don't know," Johansen said.
Johansen bid $36,000 on the lot that was originally going for $175,000. Apparently, that low price may have been the sticking point for the banks who owned the properties.
"The bids that came in on those properties were between 20 and 30 percent on the dollar, which is the reason we declined the offers. They were just way too low," explained Alan Thompson, senior vice president of Centennial Bank.
Thompson says the bank appraised its lots 30 to 90 days before the auction, so the valuation was recent and, they believe, fair.
But EN Auctioneering, the group who put on the auction, says banks are being very cautious and pricing these homes way too high. "There are many issues involved; the bailout could be one," said Ryan Nelson, with EN Auctioneering.
Eric Nelson, founder of Eric Nelson Auctioneering, says buyers' bids totaling about $7.5 million were rejected because of indecision among nervous lenders, the pending bailout and last week's stock market plunge. He said apparently banks don't want 60 cents on the dollar when the government may give them 75 or 80 cents through the bailout.
Thompson says Centennial Bank was not looking for a better deal. "Being a small community bank, we have absolutely no hope in receiving anything from the bailout," he said.
The bank says it would have lost a lot of money if they'd let the properties go for that little. "We can't afford to give them away. They're not toasters!" Thompson said.
Kelly Matthews, a senior economist with Wells Fargo, said it's unclear whether the government will buy up foreclosed properties.
"The initial proposal is that the government may buy mortgage-backed securities which could possibly include properties that were already foreclosed on," Matthews said. "But I don't believe there's any clear-cut evidence or defined program that the (U.S.) Treasury is going to buy those foreclosed homes."
Steve Cuillard, owner of Affiliated Realty in Orem and a broker specializing in foreclosure sales, said he doesn't know of any lenders who are delaying sales in anticipation of a bailout.
Meanwhile, Johansen is left without the property he thought he bought. "It would've made more sense to set their minimum bid at what they were willing to accept. It almost feels like a bait and switch," he said.
Johansen says he would have at least liked a call from the bank about their decision. He found out today, two weeks after the auction, only because he called.
Johansen hopes to get his $10,000 payment he put down on the home back in the mail.
The auctioned properties are owned by three banks and two private lenders.
The auction included an unfinished $1.2 million home in Draper and a 62-acre parcel in Park City valued at $3.5 million. The Draper home drew a $615,000 bid. The Park City parcel drew a $1.1 million offer.
E-mail: ngonzales@ksl.com
E-mail: mrichards@ksl.com
(The Associated Press contributed to this report with information from the Daily Herald. Copyright 2008 by The Associated Press. All Rights Reserved.)
